The Morning Ledger: Obama to Nominate Yellen to the Federal Reserve

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President Obama will nominate Janet Yellen today to run the Fed. Ms. Yellen’s nomination would mean the Fed is unlikely to make any unusual lurches in its easy-money policies in the near term, the WSJ writes. She has been a proponent of near-zero short-term interest rates and quantitative easing, and based on her record, she appears likely to proceed cautiously about removing the programs.

Markets are expected to be relieved by her nomination, and Asian stocks have risen on the news. “Generally people feel Yellen will take a line that’s not dissimilar from Bernanke, which will be reasonably dovish and accordingly supportive for markets,” Angus Gluskie, managing director at White Funds Management in Sydney, told Bloomberg.

Reactions to the nomination have been largely positive around the world. But Spencer Jakab cautions in Ahead of the Tape that investors should perhaps get ready for less transparency in the Fed. After months of hinting about slowing its bond-buying program, the Fed’s surprising decision not to do so in its mid-September meeting, threw markets for a loop and also indicated the Fed’s lack of openness. The minutes of that two-day meeting will be released today.

THE DAY AHEAD:

The major release today is the FOMC minutes of the September 17-18 meeting.

Companies with earnings announcements today include Costco, Family Dollar, Progressive and Ruby Tuesday.

Companies cash out of government agency bonds. Treasurers continued shifting cash assets out of government agency bonds last month, as they look for higher returns in corporate bonds and commercial paper, according to data from Clearwater Analytics. Government agency bond yields posted a big decline in the run-up to the budget and debt-ceiling battles this month, shedding 0.53 of a percentage point to represent 10.7% of corporate cash investments on Oct. 1, James Willhite of CFOJ reports. Commercial paper was the largest beneficiary, with a gain of 0.6 of a percentage point.

CORPORATE NEWS:

Sears sells prime stores to raise cash. According to former employees and analysts, the company has sold nearly a dozen profitable Sears stores over the past 18 months to shore up its financial position, the WSJ reports. In the first half of this year, Sears pocketed $277 million from selling stores and leaseholds. But the strategy seems unusual because it could make it harder for the chain to improve its struggling sales. “Retailers invest in their best stores and refurbish them, they don’t sell them,” said Robert Futterman, CEO of RKF, which leases properties to retailers.

Walmart to end joint venture and buy out Bharti.Walmart and Bharti Enterprises have announced a breakup of their joint venture in India after a series of regulatory investigations and concerns over international investment rules for the country’s retail sector, the FT reports. Walmart’s decision to focus on wholesale operations and at least temporarily abandon aspirations of opening full retail stores is likely to be seen as a further blow to attempts by India’s government to attract major global retailers into the country. “Both sides are good companies and both wanted to make this work, but the rules simply didn’t allow it,” said Arvind Singhal, CEO of retail consultants Technopak Advisors in India.

Jos. A. Bank proposes deal with Men’s Wearhouse.Jos. A. Bank has approached Men’s Wearhouse for a possible merger, a deal that could help the companies cut costs and bolster themselves in a tough sales environment, the WSJ writes. Both companies reported disappointing second-quarter sales, with Men’s Wearhouse reporting a decline of 2.3%, and Jos. A Bank announcing a 10.7% drop.

ECONOMY:

U.S. refiners export more fuel than ever. American companies are exporting its energy boom around the world, as crude production soars. Refiners along the Gulf Coast are increasingly using local oil, which is less expensive than the North Sea crude that European refiners use, the WSJ reports. This means fuels made in the U.S. may be a bargain abroad even after adding shipping costs. Drivers in the U.S. are also buying less gasoline because vehicles have become more energy efficient. “It’s a happy confluence of events that our demand has dropped off just as crude oil supplies and demand for products has grown elsewhere,” said Ed Hirs, an energy economist at the University of Houston. Countries with big appetites for U.S. fuel include not just Japan, a traditional stalwart buyer, but also China, India, Brazil and Venezuela.

Money funds avoid some U.S. debt on fear of repayment delays. As Washington battles over the debt ceiling, the $2.66 trillion money market industry is preparing for the worst. The funds, including those run by PIMCO, Federated Investors and Fidelity Investments, are shying away from government debt that matures in the next few months and keeping more cash on hand to help them withstand any repayment delays, Reuters reports. Interest rates on one-month U.S. government debt hit their highest levels in five years on Tuesday. And the Treasury sold $30 billion in four-week bills at 0.35 percent, the highest yield since October 2008. Demand was at its weakest in four-and-a-half years. “The market isn’t (worried about) a long-term default. The concerns are about liquidity,” said Jerome Schneider, who oversees the PIMCO Government Money Market Fund and the PIMCO Short-Term Fund.

REGULATION:

Corporations use mergers abroad as tax shelter. From New York to Silicon Valley, more and more large American corporations are reducing their tax bill by buying a foreign company and effectively renouncing their U.S. citizenship, David Gelles reports in DealBook. Multibillion-dollar cross-border mergers and acquisitions are the new type of “inversions,” instead of reincorporating in a place like Bermuda. Robert Willens, a corporate tax adviser, estimates there have been about 50 inversions over all. Of those, 20 occurred in the last year and a half, and most of those were done through mergers. While it seems clear that these companies are doing the math, the deals are also presumed to be strategic in other ways. “You’re not going to do a merger just to get the company offshore,” said Stephen E. Shay, professor at Harvard Law School. “This should be an opportunistic benefit on top of a strategic rationale.”

E.U. lawyers warn of limits in building banking union. Part of Europe’s proposals for a banking union that would jointly deal with stressed lenders may fall foul of E.U. law, Reuters reports. In a recent piece of legal advice, the European Council’s legal service warned of the pitfalls of giving a new agency or board too many powers to close or salvage troubled banks.

New rules help angel investors. An easing on some of the U.S. government’s longstanding restrictions on fund-raising has brought about a new kind of financing vehicle, called an online syndicate, that allows early-stage investors to quickly assemble a group of investors over the Internet, the WSJ writes. The new rules eliminate a ban on “general solicitation,” meaning companies can now publicly market their fund-raising efforts through social media or syndicate services. Through a service like AngelList, a person or firm creates a group that individual investors can join, while the leader of the syndicate decides which of them to accept or reject. Advocates believe that by enabling a single person or firm to rapidly amass a large amount of capital, syndicates could democratize private company investing and disrupt the old boys’ club of venture capital.

CFO MOVES:

Loewssaid Peter Keegan will retire as CFO in May. Mr. Keegan, who has been with the company approximately 18 years and has been CFO since 1997, will remain with the company as an advisor for an unspecified period, the company said in a news release. David Edelson, a senior vice president who joined Loews in 2005, will succeed Mr. Keegan. Mr. Keegan received 2012 compensation valued at $3.8 million, including a $990,000 salary and a $2.1 million bonus, according to its most recent proxy statement.

Green Dotnamed Grace Wang as CFO. Ms. Wang was most recently based in London as a divisional CFO for J.P. Morgan Chase & Co. She succeeds John Keatley, who told the company in April that he would leave at the beginning of September to relocate to Sweden, his wife’s original home, and work a Stockholm-based technology company. In 2012, Mr. Keatley received compensation valued at $992,270, including a salary of $425,000 and an option award valued at $559,117, according to its proxy.

Deloitte's Financial Reporting Alert discusses certain key accounting and financial reporting considerations related to the current economic conditions in the eurozone and Puerto Rico, including a summary of financial reporting implications that would result from a country's decision to exit the eurozone and an outline of disclosures recommended by the SEC in 2012 about European sovereign debt.